Monday, December 5, 2016

Why Are Consumers Happier?

Financial FAQs

Why are consumers much happier during these holidays? The University of
Michigan's consumer sentiment index for November jumped 6.6 points to a
six-month high while the Conference Board's consumer confidence index jumped 6.3
points to 107.1 for its best reading of the cycle, since July 2007.

It has to be in part the record-low November unemployment rate of 4.6 percent for
starters, and rising wages now that minimum wages are rising in major
metropolitan areas, as well as whole states like California and Washington.
Econoday says the second Q3 GDP growth estimate included a sizable upgrade for
consumer spending, up 7 tenths to an annualized and inflation-adjusted 2.8
percent. This is down from the second-quarter's 4.3 percent rate but the average
of these two is the best in nearly two years.

It’s in the service sector that employment is growing fastest. In another
sign of strength for the economy, the ISM
non-manufacturing index jumped 2.4 points in November to a 57.2 reading that
tops most forecasts.

Employment for the ISM survey, where growth was soft in October, shot more
than 5 points higher to an outsized 58.2. Averaging recent scores for this
reading puts the trend at a softer but still very respectable mid-50s rate. New
orders are very strong, at 57.0, with export orders also at 57.0 in a reminder
of the importance of foreign demand for the nation's service sector. Business
activity is a highlight of November's report at 6l.7.

This is one reason boosting minimum wages is so important. Most jobs are
being created in the lower-paying service sector, which now employs some 80
percent of workers, and has been a major reason for the tepid 2 percent growth
rate average of the economy since the end of the Great Recession.

Manufacturing has been hit hardest, and there is some doubt that Prez-elect
Trump will be able to fulfill his promise to bring manufacturing jobs back that
were lost. So we will have to rely on the non-manufacturing industries listed
below for future growth in jobs and wages.

That’s why economists and the Fed believe it is more important to look at the
personal income and consumption expenditure figures in such as the Econoday
graph above to know where future growth in incomes (and higher demand) will come
from.

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Harlan Russell Green, Editor/Publisher

Harlan Green is a Mortgage Broker in Santa Barbara, California since the 1980s and economist. As Editor/Publisher of PopularEconomics.com, he has published 3 weekly columns-- Popular Economics Weekly, Financial FAQs, and The Mortgage Corner-since 2000, and is a featured business columnist for Huffington Post. Please refer to the populareconomics.com website for further information.